Exam I Review New Venture Development Spring 2013

Question 7 Looking at the horizontal analyses for the four restaurants, which one seems to be having issues managing its cash and current liabilities? a.Panera b.McDonald’s c.Ruby Tuesday d.Chipotle

Question 7

Question 10 Where on Panera’s debt and stockholders’ equity section might we see the effect of a 7% decrease in cash? – Increase in current liabilities – Increase in retained earnings – Decrease in capital surplus – Increase in treasury stock

Question 10 Decrease in one current asset may lead to increase in another (e.g., cash to inventory), but question wants matching decrease on L + SE side of balance sheet.

Question 10 Where on Panera’s debt and stockholders’ equity section might we see the effect of a 7% decrease in cash? – Increase in current liabilities – Increase in retained earnings – Decrease in capital surplus – Increase in treasury stock None of the other answers matches what is happening on the balance sheet

Questions 12 and 13 Al’s VC = $5, VR = $10, fixed costs = $50,000 10,000 BEQ = FC/(VR-VC) = $50,000/($10-$5) = 10,000 BE$ = FC/gross profit margin = $50,000/50% = $100,000 in sales Or $100,000 BE$ = BEQ X VR = 10,000 X $10 = $100,000

Question 14 Decrease in accounts receivable and inventory with an increase in accounts payable. What’s the effect on operating activities cash flow? – Decrease in AR and inventory means less $ tied up in non-cash current assets – Increase in AP means less $ going out to pay suppliers

Question 15 Build-A-Bear receives inventory that is unfinished and provides employees in store to help finish stuffed animals. Compared to other stores selling finished stuffed animals, we would expect to see on income statement: – Lower COGS – Higher operating expenses

Example Schmidt Enterprises sells mass-manufactured koozies on game days Schmidt management learns it can get higher sales price by customizing koozies in-house with own employees Now employees receive unfinished koozies from Asia and customize silk-screening – COGS goes down (lower variable cost because unfinished) – Operating costs go up (because you’re paying employees a fixed wage)

Question 16 Calculate BBW’s BE$ BE$ = FC/gross profit margin = $162,881/.406 = $410,105

What about Carl? See Carl’s Trucks Excel file with interactive graph

μ = 91 sd = 7